1. Field
This disclosure relates to licensing of intellectual property rights.
2. Description of the Related Art
Traditional patent licensing has heavy transaction costs. The patent owner must identify prospective licensees, and then must convince the prospective licensees to enter into negotiations, and then the seller and buyer must negotiate. Both sides are usually represented by patent counsel and litigators who analyze the merits of the patent, analyze whether the patent covers the buyer's products, and evaluate likelihood of success in litigation. The seller's counsel usually prepares a custom license agreement for each transaction. Attorneys on both sides usually negotiate the deal points as well as the specifics of the contract.
The traditional patent licensing model makes sense if the purchase price is $50,000 or higher. But if the price is lower than $50,000, the transaction costs for each side become material to the price. For this reason it can be very difficult to pursue licenses priced at under $10,000. Yet many patent owners want to sell licenses for less than $10,000.
Nobody thinks patent litigation is cheap. Every two years, the American Intellectual Property Law Association (AIPLA) issues its Report of the Economic Survey, which includes statistics about the cost of patent litigation. According to the 2011 report, for patent infringement litigation in which there was less than $1,000,000 at risk, the average total cost of litigation was almost $1,000,000; where there was between $1,000,000 and $25,000,000 at risk, the average total cost of litigation was almost $3,000,000; and where there was greater than $25,000,000 at risk, the average total cost of litigation was over $6,000,000. The 2011 report follows decades of clear upward trends in litigation costs.
Patent litigation is slow, too. It usually takes about one to two years to get a district court decision. An appeal almost always follows because the cost of the appeal is so small compared to the value of the case. Appeal adds another year, and frequently results in a remand to the district court to reconsider some issues or even for a new trial.
While a patent lawsuit is pending, a business can grow, shrink, merge, spin off and dissolve. The rapid pace of technology and the speed of upward and downward market changes also can dramatically increase or decrease the value of patent liability while a case is pending. Thus, patent cases are often expensive distractions to the ordinary course of business.
Most patent litigation starts when the patent owner files a lawsuit. When a patent owner becomes aware of an infringer, the owner can simply wait until he pleases to bring an infringement suit. Meanwhile, the monetary damages continuously accrue—with no effort expended by the patent owner. If the patent owner has sent a notice letter to the infringer, the infringer can accrue additional liability as a willful infringer.
The Declaratory Judgment Act balances power between the patent owner and the accused infringer. Under the Declaratory Judgment Act, a company can file a declaratory judgment (DJ) action to “clear the air” about whether it is infringing. Prior to 2007, an accused infringer could file a DJ action only when faced with an express threat of litigation. That changed with the Supreme Court's Medimmune decision. Since then, anyone can file a DJ action against a patent owner if they can show there is a “case or controversy.” In general, establishing the existence of a case or controversy for purposes of declaratory judgment jurisdiction requires something more than just a communication from a patent owner to another party, merely identifying its patent and the other party's product line. How much more is determined on a case-by-case basis. However, the courts have authorized DJ jurisdiction because the patent owner offered a license to the plaintiff.
Though patent owners can be bullies, sometimes the Declaratory Judgment Act makes patent owners the victims of bullying.
In an online software marketplace, a software developer makes their software available for download from the marketplace. The marketplace makes the software available for download to customers. Customers go to the marketplace, select the software to be downloaded, pay electronically (e.g., credit card or Pay Pal), and then are able to download the software. The customers do not own the software—it is provided under license.
Throughout this description, elements appearing in figures are assigned three-digit reference designators, where the most significant digit is the figure number and the two least significant digits are specific to the element. An element that is not described in conjunction with a figure may be presumed to have the same characteristics and function as a previously-described element having a reference designator with the same least significant digits.